AstraZeneca plc (ADR) (AZN): Is This Purchase a Game-Changer?

Important Products and Synergies

AstraZeneca plc (ADR) (NYSE:AZN) is clearly interested in Pearl’s next-generation inhaler technology. These inhalers have been shown to mitigate the symptoms of COPD and control asthma in formerly hard-to-manage patients. Although the science behind these products is quite complicated, they seem to have fewer side effects than their predecessors. Moreover, patients who use them note that they make it extremely easy to deliver accurate, effective doses of inhaled medication. Since COPD affects more than 200 million former smokers, miners, industrial workers, and other individuals who have inhaled harmful chemicals and compounds over long periods of time, Pearl’s technology is a boon for AstraZeneca. Since the pharmaceutical giant lacked a robust in-house inhaler division, this acquisition will enable it to hit the ground running.

Potential Drawbacks and Points of Confusion

Unfortunately, the company is a relatively late entrant into the next-generation inhaler field. GSK and other companies have already developed or acquired marketable drugs to treat COPD, and it may take some time for AstraZeneca to catch up to its peers. If COPD and asthma sufferers prove to be resistant to Pearl’s technology, AstraZeneca will have to take a hefty loss on this deal. While the tiered nature of the deal will provide some protection, there is a risk that this acquisition will turn out to be a disappointment for everyone involved.

Possible Plays and Long-Term Outlook

While it is difficult to handicap the likelihood of this deal’s success, investors who believe that it makes AstraZeneca more attractive over the long term should conduct further research before jumping in. That said, it seems that the obvious way to play this deal is through a long position in the drug-maker. AstraZeneca is not known for wild price swings, and its stock has under-performed the broader market for some time. However, it does offer a healthy dividend and may offer proverbial “pay to wait” protection. Given the potential upside to this deal, there are plenty of reasons to take a closer look at AstraZeneca.

Mike Thiessen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Mike is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Is This Purchase a Game-Changer? originally appeared on Fool.com and is written by Mike Thiessen.

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